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How a Territory lost its farming lands in a furtive privatisation rip-off

By Brendan O'Reilly - posted Friday, 6 December 2019


The land value payment formulas (not widely publicised) were mostly set at $110 to $162 per Dry Sheep Equivalent (DSE), inclusive of the right for a principal residence, and took little account of location. The carrying capacity of the rural leases in turn was assessed at a highly conservative one to one-and-a-half sheep to the acre. This was based on the land in its original timbered state, which consequently reduced the price paid by lessees (to about $170 an acre).

Political debate centred on the proposed Land Management Agreements rather than on the low land prices. In the course of all this, much ACT rural land was affected by the 2003 bushfires, and the ACT government felt obliged to spend millions replacing rural fencing on its leases. Consequently its net revenue from the huge privatisation was negligible.

Details of the prices actually paid for the new 99 year leases were never publicised. I made an FOI request, and discovered that by 2005 the ACT had sold off 18,595 hectares of land as 99 year leases for a total of $6.7 million in land value payments and $1.14 million in improvement payments (including for 139 dwellings). This latter figure appears a gross undervaluation, bearing in mind that the ACT government inherited a substantial stock of improvements with its rural lands and had spent many millions on fencing, and capital works. The ACT Government continued to issue 99 Year leases well into the current decade, responding to pressure from lessees that had originally missed out.

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Different standards of valuation seem to have been applied to government-owned and lessee-owned improvements. The ACT seems to have received a relative pittance for improvements sold with 99 year leases. In cases where rural leases were resumed by the ACT Government, however, payments for improvements on individual properties have sometimes run into hundreds of thousands of dollars. Repairs to bushfire damaged fencing alone (mainly on lands for which 99 year leases were issued, and paid by the ACT government) came to nearly $4 million.

Fast -forwarding to the 2014 to 2017 period, the ACT government's LDA spent more than $30 million buying up strategic rural leases. The public was not told that, between five and 15 years earlier, the government sold these same properties to its rural tenants, receiving (according to FOI information supplied to me) a total of only $831,710 for the land and government-owned improvements. Conveyances of 99 year leases to private buyers yielded equivalent capital gains so that any rural lessee, who was not already a millionaire, became one upon being granted a 99 year lease.

Ross Barrett (LDA Chair from 2012 to 2017) recently told an official inquiry that future ACT Governments now faced the daunting prospect of competing with private developers to secure increasingly expensive land. He said it was "inarguable" that the privately owned rural blocks would be rezoned for housing, which would increase their value ten-fold and make them more expensive to acquire in the future. Land development had been the monopoly of the ACT Government and his opinion was that they are going to lose it in the next few years, posing enormous problems for the ACT economy.

Looking at individual farm privatisations, subsequently bought back, two stand out.

The 104-hectare Wintergarden Estate adjoins the backyards of the inner-northern suburb of Cook. The Tully family had occupied this grazing land for generations. Many decades ago, the Commonwealth bought the property at market value and rented it back to the Tulleys. In December 2010, by granting a 99-year lease (backdated to 2006), the ACT effectively sold the land to back to the family, who were charged an unbelievably low $79,000. The government subsequently bought back this 99 year lease in August 2016 for $4 million, an astronomical capital gain for such a short period.

The most costly episode for ACT taxpayers, however, are deals that relate to "Gininderry", a property covering 678 hectares near the outer northern suburb of Holt.

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Corkhill Brothers (a landscaping company) bought the then short-term lease from the previous lessee in September 2002 for $855,255. In March 2004 , the ACT granted a 99-year lease at a price of $122,000 for government-owned improvements and $224,615 for the land. (According to the Canberra Times the site had by this time been identified for residential development). In November 2016, the LDA bought back the 99-year lease for a headline price of $4.52 million. At present an eventual 11,500 homes are planned for the development. The cheapest blocks in Ginninderry (347 sqm) are currently being advertised at $291,280, with larger blocks selling to $522,000.

The rub for ACT taxpayers is that a subsidiary of Corkhills, Riverview Developments, is managing the development under the buy-back arrangements, sharing 40 per cent of the costs and profits. Corkhills were contributing an adjoining 332 ha grazing block on the NSW side of the border, which (with the help of the ACT government) they seek to rezone for housing. The Ginninderry project is likely to generate profits of hundreds of millions of dollars.

According to the Canberra Times "documents released under freedom of information laws show the joint venture is valued at about $1.6 billion, with the ACT government to make about $208 million in profit. Given that profits are to be shared 60:40, Riverview stands to make $139 million". Had Ginninderry not been privatised the ACT Government would not have needed to enter a joint venture arrangement.

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About the Author

Brendan O’Reilly is a retired commonwealth public servant with a background in economics and accounting. He is currently pursuing private business interests.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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